HMO favorite scapegoat

Your June 15 editorial, “`Less care, not more’,” raises an interesting question concerning what can be done to resolve what is obviously a terrible result for Cynthia Herdrich’s experience in suffering from inadequate attention to her medical problem from her HMO

Who is at fault? In the June issue of Fortune Magazine (pp. F64-F65), the ranking of the top 26 health care companies in the Fortune 1,000 had gross revenues of $195 billion and $2 billion in losses.

The companies which took the biggest losses were three large HMOs. Sun Healthcare Group (lost $1.7 billion on sales of $2.6 billion), Integrated Health Services (lost $1.8 billion on sales of $2.6 billion), Mariner Post-Acute Ntwk (lost $1.8 billion on sales of $2.2 billion).

These surprising losses posted by only five companies in the health care industry suggest there is something more at work than greed in Herdrich’s case. The problem is that health care companies are not getting paid enough to break even much less make a profit in the aggregate. Want more?

Humana lost $382 million on sales of $10 billion; Caremark lost $143 million on sales of $4 bilion. The public perception is that the health industry is greedy; hence poor Ms. Herdrich. The reality is otherwise.

If “the system” is failing its patients, the financial evidence is overwhelming that the HMO is serving as a scapegoat to advocates of a congressional solution because it is on the front lines. Could the problem be that the HMO is not able to price its services to cover expenses to provide more expensive service and still enjoy any profit much less a fair profit on its equity?

If Hendrich’s HMO is at fault, it would appear that we have an industry-wide problem, not merely an HMO problem. If you look at the health industry companies which are in the Fortune 1000 of American firms, you will find from the figures of profit as a percentage of revenues, of a total of the 26 largest companies, one company is in the double-digit territory of 11 percent, one is at 9 percent and one is at 8 percent, five at 4 percent, four at 3 percent, two at 1 percent, four at 0 percent and 11 with losses.

The evidence is clear that the only thing sicker than Hendrich is the health care Fortune 1000 industry as a whole. She survived her illness. But unless the Fortune 1000 health care industry firms can collect another $2 billion this year to prevent a repeat of last year’s losses plus another $5 billion to cover four percent inflation on last year’s sales plus cover any patient and hospital caseload growth, any “systematic failure” of patient care, if such is indeed the case, will pale in comparison to the failure of the system itself.

Thatcher M. Adams Jr. is a Bangor attorney.